THE proposed petroleum subsidy programme intended to provide relief to low-income segments of the population appears to be a last-ditch effort by a politically embattled government to regain lost space as it faces both pressure from the opposition and high inflation which could harm its electoral prospects.
On the face of it, the move is likely to prove a non-starter; it will be difficult, if not impossible, to pursue it under the IMF should Islamabad strike the long-awaited deal with the Fund despite this new plan.
The scheme presupposes that the subsidy will reach every targeted individual, will not be misused and that its cost — estimated at Rs120bn — can be cross-subsidised by charging an additional tax of Rs100 per litre on petrol consumed by ‘affluent’ sections. The designers of the programme have yet to explain their definition of ‘affluent’.
Details of how the scheme is going to be implemented remain sketchy. If the idea is to give the fuel subsidy to BISP beneficiaries, the government had a more practical way of increasing their stipend under the social protection programme, rather than creating new market distortions and risking the IMF programme.
After all, how many BISP beneficiaries own motorbikes, rickshaws or small cars? Even if the proposal is implemented without hiccups, it will not help the ruling set-up recoup its political capital.
At the most, the Robin Hood effect the move may create will retrieve only narrow space for the PML-N and its allies — definitely not enough to improve their electoral chances. The move is going to strengthen the impression that the coalition partners are sinking deeper into the political quagmire.
The proposed plan underlines the fact that the present government is no different from its predecessor. Like the previous PTI government, it seems more interested in reviving its political capital through ad hoc, short-term measures rather than implementing sound economic policies to fix the collapsing economy, executing governance reforms, expanding the tax net and cutting wasteful expenditure. It is common for politicians to pursue populist policies closer to the elections.
The PML-N has a long history of offering such ‘relief’ — at a cost to the economy. The massive tax cuts announced by the party’s then finance minister Miftah Ismail in its last budget before the 2018 polls are just one example.
The decision did not help the party return to power. It also proved quite costly to the economy just like the PTI decision to cut fuel and power prices and freeze them to improve its government’s rating ahead of the vote of no-confidence against Imran Khan a year ago.
Past experience underscores the fact that populist solutions to the problems faced by the people always prove untenably expensive for the economy and those who are supposed to benefit from them.
Published in Dawn, March 21st, 2023